This commentary is by Tom Evslin of Stowe, an entrepreneur, author and former Douglas administration official. It is republished from the Fractals of Change blog.
The Wall Street Journal has a story about President Joe Biden’s feeble attempt to increase U.S. oil production by promising to refill the strategic reserve at a low price. Up until now he has discouraged drilling and promised to end the use of fossil fuels. He’s complained about oil company profits; but what’s he’s actually done is made it easier for them to profit greatly by restricting new supply in the absence of Russian competition.
According to the WSJ: “Energy executives and analysts expressed doubts the plan would spur a large increase in production in the short term. … They hope to capture high oil prices while they are in place. Rising drilling costs and pressure from investors to limit production and return excess cash to shareholders are also dimming the outlook for production growth.”
Time for the oil companies and the president to get off the dime. More U.S. oil needs to flow immediately — both to keep driving, trucking, and heating costs down domestically and to preserve Europe’s ability and will to forgo Russian oil. This is cold war 2.0 (let’s hope it stays cold for us) and profiteering is not acceptable, especially from companies which are being protected from competition. Three steps’ll do it:
- An immediate huge sale of oil and gas leases on federal land, but only to those who will both drill immediately on the new leaseholds and increase production from their current holdings. This is an offer that the oil company investors won’t be able to say no to because they run the risk that their competitors will get the leases.
- Expedited permitting — really expedited — but, again, only for those who will increase production now on existing and newly permitted locations. If some permitting is being expedited, some will get delayed. Those who don’t want to increase production can wait.
- A windfall profits tax. I’m a free-market fiscal conservative. However, since we’re protecting these companies from Russian, Iranian, and Venezuelan competition, they are not operating in a free market. They are benefitting from the embargos. Because our goal is increased production, companies should be able to escape the excess profits tax by plowing those profits back into immediately increased drilling.
The first two steps can and should be taken by executive order. The president, who has been very strong in his support of Ukraine, needs to defy the extreme left of his party and get the oil flowing that’ll let us and our allies deny Putin his energy weapon. The third step takes Congressional action which should happen in the lame duck session after the election. Some on the right will object to the windfall profits tax. Some in the middle will try to protect the oil companies. The left won’t want an exception for more drilling. Nevertheless, when Americans get their oil bills this winter, there’ll be plenty of public support for making sure oil companies don’t get to profiteer during a war by sitting on their assets.